Fifty-five hospitals in 21 states settle Medicare fraud case for $34 million; whistleblowers' lawyers comment on settlement

BUFFALO, N.Y., July 2, 2013  /PRNewswire/ -- The federal government announced today that 55 hospitals in 21 states are paying a total of $34 million to settle allegations they overcharged Medicare for a back procedure known as "kyphoplasty" using a fraudulent billing scheme first exposed by two whistleblowers represented by Phillips & Cohen LLP. 

Today's settlements result from the government's ongoing investigation into billing for kyphoplasty procedures by hospitals nationwide. The government so far has recovered over $74 million from more than 100 hospitals – including the settlements announced today -- as a result of its investigation and information provided by the whistleblowers.

"This isn't a case of simple paperwork errors or innocent misunderstanding of Medicare rules," said Tim McCormack, a Washington, DC, lawyer with Phillips & Cohen. "Hospitals across the country misrepresented the type of treatment they provided to patients so they could bill Medicare for expensive inpatient stays."

The government became aware of the Medicare billing scheme as a result of a "qui tam" (whistleblower) lawsuit filed in 2008 in federal district court in Buffalo, New York, by two former Kyphon employees, Craig Patrick and Chuck Bates.  

The whistleblowers alleged Kyphon, which sold the equipment and materials used to perform the procedure, persuaded hospitals to submit false claims to Medicare and other government healthcare programs by showing how much greater their revenues would be by billing kyphoplasty as an inpatient, rather than an outpatient, procedure. Inpatient care generally isn't medically necessary for routine, scheduled kyphoplasty procedures.

Kyphon was acquired later by Medtronic Spine LLC, which paid $75 million in 2008 to settle the allegations. Today's settlement brings the total recoveries to the government from kyphoplasty-related cases to more than 149 million.

Kyphoplasty is a minimally invasive procedure used to treat certain spinal compression fractures often due to osteoporosis.  A balloon device pumps up the compressed vertebra, and then bone cement is injected into the cavity after the balloon is removed. Generally patients fully recover within a few hours.

"Taxpayers are fortunate to have such a talented government legal team working on their behalf to recover Medicare funds that otherwise would have been lost," said attorney Matthew Smith of Phillips & Cohen. He singled out Trial Attorney Colin Huntley of the Department of Justice; Assistant U.S. Attorney Gretchen Wylegala, Investigator  Margaret McFarland and Auditor Theresa Tetlow of the US Attorney's Office in Buffalo; and Special Agent Peggy Glynn of the Department of Health and Human Services Office of the Inspector General  for their dedication and work on the case.

The False Claims Act offers rewards to whistleblowers who  file qui tam lawsuits against entities that are defrauding  the government if funds are recovered. Whistleblowers are awarded with 15 percent to 25 percent of the amount recovered when the government joins the case.

Phillips & Cohen is the nation's most successful law firm representing whistleblowers, with more than $11 billion in recoveries to governments resulting from their cases. Phillips & Cohen represents whistleblowers in qui tam cases and claims made under the SEC, IRS and CFTC whistleblower reward programs.

The hospitals that are settling are located in Alabama, California, Delaware, Florida, Georgia, Hawaii, Iowa, Kansas, Kentucky, Louisiana, Massachusetts, Michigan, Mississippi, Missouri, Nevada, North Carolina, North Dakota, Ohio, Oklahoma, Tennessee and Texas.

For a complete list of the hospitals that are settling, see www.phillipsandcohen.com.

SOURCE Phillips & Cohen LLP